Epic Games – Steam pressure.

Pressure on Valve could lead to pressure on Google.

• Valve is resorting to underhand tactics to undermine Epic’s competition on the PC in another sign that the app store business model, in general, is coming under real threat.
• Valve has been virtually unchallenged in the market for online purchasing of games on PCs for some time and in all aspects but one has done a good job at providing a high-quality user experience.
• The one exception is price, and this is the lever upon which Epic Games has decided to push.
• Epic Games is the creator and owner of the wildly popular Fortnite game and has cleverly used this popularity to ensure that its PC app store is installed on millions of PCs.
• From there it is simply a matter of enticing other content creators to make their content available on its platform in order to mount a viable challenge to Valve’s dominance.
• This bore meaningful fruit at the end of January 2019 when Epic managed to lure Deep Silver’s popular Metro Exodus game from Valve’s Steam to be exclusive on its app store.
• The real winners here are the game players who will see a price cut from $60 to $50 for the latest version of the game.
• Deep Silver is also better off as it gets to earn more revenue per game than it did on Valve at $60 as Epic is offering 88% of the revenue compared to 70% at Valve.
• The risk of moving to a new store is always user reach, but the popularity of Fortnite has pretty much solved this problem as Fortnite has a user base of at least 200m installs.
• This is a real problem for Valve whose only response in the long-term can be to cut its prices to match.
• In the short-term Valve is resorting to guerrilla tactics by calling the move “unfair to Steam users” which has stoked a slew review bombs on Deep Silver games as well as negative coverage in social media.
• How a better deal for game players is unfair to users is a complete mystery and Valve has declined to explain why it thinks that this is the case.
• The answer, of course, is that it isn’t, and Valve is going to have to cut its prices and compete on quality of service and the value of its community if it wants to stay in business.
• The big question, of course, is what does this mean for Android devices where one app store utterly dominates and where Epic Games has already been able to open a chink in Google’s armour (see here).
• Fortnite is currently available on Android as a direct install from Epic’s website which is a clunky and insecure way to install the game as users have to enable installation from unknown sources.
• Hence, if Epic was to offer an Android version of its app store from which Fortnite could be safely and easily downloaded and managed, it could pick up traction from other 3^rd party app providers.
• Significant traction would put similar pressure on Google as has been placed on Valve which could, in turn, lead to harder and harder questions being asked about Apple’s app store practices.
• Having a thriving 3^rd party app store is a cornerstone for any digital ecosystem and is assessed in RFM’s Law of Robotics No. 4.
• Epic is very far from going down this route, but the potential is there should it choose to move in this direction.
• This would have a negative impact on Google particularly which dominates the ecosystem on Android devices.
• However, in the immediate-term, Google remains likely to be the most resilient to the current privacy-related storm but Apple’s recent sell-off also makes it look quite defensive once again.